Japan Lifts Bar for Green Car Subsidies With $30,000 Off Toyotas

Japan is about to raise the bar for governments subsidizing zero-emission cars, as it pledges incentives that may exceed $30,000 a vehicle for Toyota Motor Corp.’s first hydrogen-powered sedan.

Rebates from Japan’s national and local governments may top a combined 3 million yen ($29,500) per car. Prime Minister Shinzo Abe said last week he plans to extend subsidies of at least 2 million yen, while Aichi prefecture, where Toyota is based, may provide about 1 million yen for local purchases, according to Takashi Horibe, the area’s auto and environmental conservation specialist.

The support from Japan, the country with the world’s biggest debt burden, is poised to exceed the level of inducements that China offers for buyers of electric vehicles. Toyota will join Hyundai Motor Co. and Honda Motor Co. in confronting challenges with hydrogen cars’ high costs and lack of refueling infrastructure.

“Fuel cells are one of the few frontiers where Japan can lead the market,” Thanh Ha Pham, a Tokyo-based analyst with Jefferies Group LLC, said by phone yesterday. “For any new technology you need government support for popularizing.”

Abe said during a visit to Japan’s Fukuoka prefecture on July 18 that the government plans to have more than 100 stations for fuel-cell cars, without giving a timeframe.

His comments followed a government plan unveiled in June for supporting the spread of fuel-cell vehicles and cultivating an industry forecast to generate 1 trillion yen in revenue by 2030. The government is seeking to bring prices of fuel-cell cars down to about 2 million yen by 2025, after subsidies.

Government Subsidies

The subsidies from Abe’s administration and local prefectures including Aichi haven’t been finalized. Toyota said last month that its as-yet unnamed fuel-cell car will go on sale in Japan by April for about 7 million yen.

The combined 3 million yen in indicative incentives would cut the sticker price by about 40 percent and bring its cost in line with the Lexus CT Hybrid, which sells for 3.6 million yen to 4.6 million yen, according to the company’s website.

The subsidies would also be more than triple the rebate currently offered to buyers of Mitsubishi Motors Corp.’s all-electric i-MiEV, which qualifies for a 950,000 yen subsidy in most prefectures.

The International Monetary Fund estimates Japan’s public debt at 242 percent of gross domestic product this year.

China Support

For China, home to the world’s largest auto market, the central government is stepping up support for electric vehicles as part of a broader plan to gain leadership in the technology, cut pollution and reduce energy dependence.

In the past month, China has mandated that EVs make up at least 30 percent of state purchases and will waive a 10 percent purchase tax from Sept. 1 through 2017 to spur demand. In Beijing, buyers of an EV can get as much as 114,000 yuan ($18,400) off the sticker price after central and local government rebates, while owners in Shanghai are issued free license plates that cost about 70,000 yuan for conventional vehicles.

Even with the government’s support, EV sales are on pace to fall short of the official target for 5 million on roads by 2020, with consumer concerns over price, convenience and reliability outweighing the lure of subsidies.

Toyota, the world’s largest automaker, is prioritizing fuel-cell technology in its plans for introducing zero-emission vehicles over the electric vehicles championed by China and carmakers including Tesla Motors Inc. and Nissan Motor Co.

Toyota has said hydrogen-powered autos will be a more attractive zero-emissions option for consumers than battery-electric vehicles because their range, performance and refueling time are competitive with gasoline cars.

Hydrogen’s Perks

While fuel-cell cars are propelled entirely by electric motors like those in Tesla’s $71,000 Model S, they don’t need to be plugged into power outlets to store energy. Instead, hydrogen gas passes through a stack of plastic membranes and platinum-dusted plates to produce electricity. The stacks remain expensive because of the precious metals needed, as do the high-pressure tanks.

The global fuel-cell vehicle market may reach 3.3 trillion yen by 2025 from an estimated 34 billion yen next year, with major growth happening after 2020, according to estimates by Jefferies.

California’s Incentives

The U.S. offers a $7,500 per vehicle federal tax credit to electric vehicle buyers. States also provide additional incentives: buyers in California, for example, are eligible for $2,500 rebates, local utilities offer discounted electricity and drivers are permitted to use high-occupancy vehicle lanes.

California plans to provide about $47 million for 28 new stations selling hydrogen for fuel-cell cars. Those stations combined with 16 in development and 10 already in operation will be enough to support at least 10,000 vehicles, Jim Lentz, Toyota’s North American chief, said in May.

In Europe, Norway has the most generous incentives for electric cars, including reduced taxes as well as an exemption from all public parking fees, toll charges and use of bus lanes. Within the European Union, 18 of the 27 member states provide schemes that include tax perks and lower fees for electric cars, according to the European Automobile Manufacturer’s Association.